Why were the political futures markets so wrong about Obama and Clinton?

Commentary about business and finance.
Jan. 8 2008 10:12 PM

Bad Bet

Why were the political futures markets so wrong about Obama and Clinton?

Hillary Clinton. Click image to expand.
Hillary Clinton

So, I've been watching the action in one of the political futures markets this evening, Intrade. And the action in this prediction market has reinforced my opinion that these are less futures markets than immediate-past markets.

The price movement tends to respond to conventional wisdom and polling data; it doesn't lead them. Throughout the day and into the early evening, while polls were still open, Democratic investors, mimicking the post-Iowa c.w. and polls, believed Obama was highly likely to be the Democratic nominee. The Obama contract was trading in the lows 70s, meaning investors believed he had a 70 percent chance of being the nominee, while Hillary Clinton contracts were in the 20s.

But between 7 p.m. and 8 p.m., as the Concord Monitorbegan to post early returns showing Hillary Clinton in the lead, the contracts started to move quickly. By 8:30 p.m., with about 14 percent of the returns in and Clinton up by a 40-35 margin in New Hampshire, Obama contracts had fallen to 56 (meaning investors believed Obama has only a 56 percent chance of winning the nomination) while Clinton's rose to 46. By 9:30 p.m., with Hillary ahead 39-36 with 37 percent of the results in, the spread between the two had narrowed further. Obama was trading at about 51 and Clinton at about 47.5.

At 6 p.m., this market had written Hillary Clinton's entire presidential campaign off. At 9:30 p.m., it was calling a dead heat. What caused investors to change their minds so drastically in the space of a couple of hours? A few data points that went against the day's prevailing conventional wisdom and polls. On the Republican side, where results came in largely along the lines of both the Election Day polling data and the conventional wisdom, there's been much less movement in the political futures.

Daniel Gross is a longtime Slate contributor. His most recent book is Better, Stronger, Faster. Follow him on Twitter.

TODAY IN SLATE

Politics

The Democrats’ War at Home

How can the president’s party defend itself from the president’s foreign policy blunders?

Secret Service Director Julia Pierson Resigns

Piper Kerman on Why She Dressed Like a Hitchcock Heroine for Her Prison Sentencing

Windows 8 Was So Bad That Microsoft Will Skip Straight to Windows 10

Homeland Is Good Again! For Now.

Politics

Cringing. Ducking. Mumbling.

How GOP candidates react whenever someone brings up reproductive rights or gay marriage.

Music

How Even an Old Hipster Can Age Gracefully

On their new albums, Leonard Cohen, Robert Plant, and Loudon Wainwright III show three ways.

The U.S. Has a New Problem in Syria: The Moderate Rebels Feel Like We’ve Betrayed Them

We Need to Talk: A Terrible Name for a Good Sports Show by and About Women

Trending News Channel
Oct. 1 2014 1:25 PM Japanese Cheerleader Robots Balance and Roll Around on Balls
  News & Politics
Crime
Oct. 1 2014 4:15 PM The Trials of White Boy Rick A Detroit crime legend, the FBI, and the ugliness of the war on drugs.
  Business
Moneybox
Oct. 1 2014 2:16 PM Wall Street Tackles Chat Services, Shies Away From Diversity Issues 
  Life
Gentleman Scholar
Oct. 1 2014 4:55 PM Blood Before Bud? Must a gentleman’s brother always be the best man at his wedding?
  Double X
The XX Factor
Oct. 1 2014 4:58 PM The Religious Right Is Not Happy With Republicans  
  Slate Plus
Behind the Scenes
Oct. 1 2014 3:24 PM Revelry (and Business) at Mohonk Photos and highlights from Slate’s annual retreat.
  Arts
Brow Beat
Oct. 1 2014 3:02 PM The Best Show of the Summer Is Getting a Second Season
  Technology
Future Tense
Oct. 1 2014 4:46 PM Ebola Is No Measles. That’s a Good Thing. Comparing this virus to scourges of the past gives us hope that we can slow it down.
  Health & Science
Science
Oct. 1 2014 4:03 PM Does the Earth Really Have a “Hum”? Yes, but probably not the one you’re thinking.
  Sports
Sports Nut
Sept. 30 2014 5:54 PM Goodbye, Tough Guy It’s time for Michigan to fire its toughness-obsessed coach, Brady Hoke.